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M AY 6, 2 0 1 1

P A NK A J G H E M A W A T

RA V I M A D H AV AN

Mittal Steel in 2006: Changing the Global Steel Game

On January 27, 2006, Laxmi Niwas Mittal (LNM) and his son, Aditya Mittal, Chairman & CEO and
CFO respectively of Mittal Steel, prepared for the press conference at which they would announce
Mittal Steel’s unsolicited €18.6 billion bid to acquire the European steelmaker Arcelor. Although
Mittal Steel had been a prime mover behind the consolidation of the industry—and most participants
and observers in 2006 seemed to accept the logic of consolidation—an offer for Arcelor was unlikely
to have been anticipated by the industry. Arcelor had been created in 2001 by the merger of three
European steelmakers—Usinor (France), Arbed (Luxembourg), and Aceralia (Spain)—that were
themselves, in turn, the result of previous mergers in their respective countries. Mittal Steel and
Arcelor were at that point the two largest and most global steel producers; it would have been far
easier to imagine the two giants growing in parallel through other significant acquisitions. For
example, World Steel Dynamics had sketched out a scenario in which Mittal Steel acquires the Anglo-
Dutch steelmaker Corus and Arcelor acquires ThyssenKrupp of Germany1. Yet, at the announcement
of the offer on that winter day in London, LNM, described by the New York Times as having “never
been bashful about his global ambitions2,” would present the combination of Mittal Steel and Arcelor
as the next logical step in the evolution of the industry.

“This is a great opportunity for us to take the steel industry to the next level. Our customers
are becoming global; our suppliers are becoming global; everyone is looking for a stronger
global player.”3

A torrent of deals
The amount we will receive for this company [the Kryvorizhstal steel plant] will be 20 per cent higher than
all the proceeds received in all the years of the Ukrainian privatization.
— Ukrainian President Viktor Yushchenko4

I can say that the Ukrainian administration has been very lucky to receive this price.
— Laxmi Mittal, Chairman of Mittal Steel, the winning bidder5
Arcelor will continue to seek to grow through strategically compelling acquisitions; however, management
will not compromise shareholder value in the pursuit of this goal.
— Guy Dollé, CEO of Arcelor, the losing bidder6

This Case was prepared by Professor Pankaj Ghemawat and Ravi Madhavan as the basis for class discussion rather than to
illustrate either effective or ineffective handling of an administrative situation.

Copyright © 2010, Pankaj Ghemawat.

No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any
means – electronic, mechanical, photocopying, recording, or otherwise – without the permission of Pankaj Ghemawat.
PG0-002 Mittal Steel in 2006: Changing the Global Steel Game

Barely 3 months had passed since Mittal Steel’s previous acquisition. On October 24, 2005,
LNM had announced that Mittal Steel had won the bidding for Kryvorizhstal, Ukraine’s 10-
million tpy7 capacity steel plant, which produced one-fifth of the country’s steel output.
Kryvorizhstal was a controversial privatization, having been sold in 2004 to former president
Leonid Kuchma’s son-in-law and a business partner for around €675 million. The opposition, led
by Viktor Yushchenko, called the sale a “theft” that gave away a very valuable industrial property
and promised to annul it.8 After the Orange Revolution brought him to power, President Viktor
Yuschenko kept that promise by organizing a second auction—despite resistance from the former
owners who appealed to the European Court of Human Rights, mounting social skepticism about
privatization because of past corruption, and a Parliamentary vote to halt the sale. The new
government wanted to highlight the transparency of Ukraine’s new business culture to potential
investors, and therefore arranged for the auction to be televised live, with President Yushchenko
attending in person.

Mittal Steel, the world’s largest steel company with 59 million tons of crude steel production in
2004, was an obvious bidder in the second auction: it had lost the first auction, in 2004, despite
bidding €1.27 billion, or nearly twice as much as the winning partnership. The other competitors this
time around were a consortium led by Arcelor, the world’s second largest steel producer with 51
million tons in crude steel production in 2004, and LLC-Smart Group, a local investor group
reportedly controlled by a Russian businessman. LLC-Smart dropped out of the auction early on,
leaving Mittal and Arcelor to go head-to-head. The €4 billion that Mittal ended up paying greatly
exceeded expectations, with some reports suggesting that the Ukrainian government’s target price
had been around €2.5 billion.9

The World Steel Industry10

In 2005, the global market for steel was estimated at around 998 million metric tons (mt).11
Although the market for steel comprised several thousand distinct products, they could largely be
grouped into a few broad segments. Semifinished products were at least 8 inches thick and required
further processing. Flat-rolling them yielded plates (more than 0.25 inches thick), or sheet and strip,
thinner products that could be shipped in coils. Other kinds of products that could be formed from
semifinished steel included bars and wire rods, that were even thinner; a wide variety of structural
shapes that were used primarily in construction; and hollow pipes and tubes. Flat sheet was by far
the most important of these segments, both because of the volumes and because it included the
higher-value-added sheet steel for the automotive and appliance sectors. Other major customer
groups included service centers and distributors, and the construction sector. Price, quality, and
dependability were considered the three most important buyer purchasing criteria, although it was
difficult to get qualified by major buyers such as the automobile companies. Higher price realizations
typically reflected a focus on higher-end products, and tended to be accompanied by higher
operating costs.

From a technological perspective, there were three groups of steelmakers: integrated firms that
produced steel by reducing iron ore, minimills that produced it by melting scrap, and specialty
steelmakers that produced stainless steel and other special grades of steel for distinct submarkets and
will not be considered further here. Integrated firms traditionally dominated the industry and
followed a strategy of vertical integration, owning not only steel plants but also iron ore and coal
mines, transportation networks, and downstream processing units. In recent decades, however, many
had reduced their holdings in upstream and downstream segments so as to focus on the core
business of steelmaking. Minimills operated their scrap-based Electric Arc Furnaces (EAF) at much
lower scales than integrated steelmakers’ blast furnaces, reducing their minimum efficient scale from

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millions of tons to several hundred thousand and their capital cost per ton of new capacity from
€800+ to the range of €160–€240. Minimills had historically had a significant cost advantage over
integrated steelmakers, and had forced them out of low-end products, to the point where in the
United States, the minimills held about 45% of the total market, but continued to face difficulties in
meeting the exacting standards of automotive and appliance manufacturers. The constraints
reflected, in part, minimills’ reliance on scrap steel as primary input: impurities in the scrap steel
tended to reduce the quality of the finished steel and, furthermore, scrap prices had come under
pressure even in markets where scrap had historically been abundant. In the 1970s, the new
technology of Direct Reduced Iron (DRI) began to catch on—this process produced a scrap substitute
from iron ore that could be used to feed the EAF. In its early years, DRI quality had been very
variable, but had improved gradually, and was expected to eventually provide the same clean
metallic feedstock for EAF as the blast furnace, but at a lower cost, and without scrap’s inherent price
volatility and quality problems.12

On the whole, steel producers around the world had posted significant economic losses for
decades. Thus, Marakon Associates, calculated that steel had persistently been the most unprofitable
of the major U.S. industry groups between 1978 and 1996 (see Exhibit 1), although economic losses
had since narrowed. The pattern was repeated in most other mature markets. Thus, Mittal Steel’s
comparison of the return on invested capital (ROIC) and the weighted average cost of capital
(WACC) of the 10 largest steel producers worldwide suggested narrower but still chronically
negative spreads, with only the most recent year—2004—generating significant positive returns (see
Exhibit 2). The reasons were various and included fragmentation, very high fixed costs and exit
barriers, generally slow growth and induced excess capacity, limited product differentiation,
intensified competition from minimills and imports as well as substitution threats (which included
less-intensive use of steel as well as replacement by other materials), and the bargaining power of
organized labor and large customers.

Many observers in or interested in the steel industry thought that after some particularly bad
years in the 1990s, steel industry stakeholders—producers, unions and governments in particular—
had finally begun to move towards the end of the 1990s to bring about some much-needed
rationalization through bankruptcy-linked closures and consolidations. However, demand growth
had also taken a hand: after stagnating in the 700–800 million tpy range in the 1980s and the 1990s,
consumption had steadily increased since 2000 toward the 1 billion tpy mark. But the very recent
spike in industry profitability, in 2004, seemed to have more to do with China’s red-hot construction
sector. China accounted for close to one-quarter of demand and, more importantly, most of the recent
growth in demand (see Exhibit 3). Given the lags in building up domestic capacity to serve apparent
domestic consumption growth rates that had often surpassed 20% in recent years, China had sucked
in an enormous amount of imports. In particular, between spring 2003 and spring 2004, spot prices
for a benchmark sheet product, basic hot-rolled band, had increased from less than €270/ton to
nearly €414/ton in China, from €270/ton to slightly more than €414/ton in the European Union, and
from €270/ton to closer to €500/ton in the United States. 13 However, although Chinese demand
continued to grow, prices had stabilized, signs of overbuilding were starting to appear in 2005, and
academic experts predicted that Chinese capacity was likely to flood the world with cheap exports in
all but the specialty grades.14

Longer-run demand forecasting exercises highlighted differences rather than similarities across
regions. Thus, an analysis by Arcelor based on data through 2003 suggested that through 2010,
demand would stagnate in Japan, and grow at a 1% annual rate in the European Union, 2.5% in the
United States (where demand in the base year of 2003 was particularly low), 4.1% in South America,
5.5% in China, and 6.5% in Asia excluding China and Japan.15

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The steel industry presented a somewhat mixed picture along other dimensions of
internationalization as well. Trade in the steel industry was substantial—close to 40% of all steel
production was exported in some years—but close to one-half of it was intra-regional. In terms of
prices rather than quantities, some increases in inter-regional integration had been apparent in recent
years: according to calculations by Arcelor, the correlation of hot-rolled prices between the United
States and the European Union had doubled from 37% over 1994–98 to 74% over 1998–02.
Nonetheless, international price integration was expected to continue to be imperfect because of a
variety of barriers to international trade. Transport costs were the most obvious natural barrier and
were also subject to aggregate capacity constraints: thus, against the backdrop of a general boom in
Chinese trade, the run-up in steel prices over 2003–4 had been accompanied by an escalation of the
costs of ocean transportation to China, from €36/ton of steel to €50/ton. Other natural barriers
included delivery lags and varied product preferences. Tariffs and other policy restraints on trade
constituted the most obvious artificial barriers. While there had been significant reductions in
average posted tariff levels over the previous decades, “temporary” countervailing duties, quotas,
and other distortionary policies such as subsidization of domestic producers or bail-outs remained
common.

The general tendency of governments to support domestic producers reflected both concerns
about preserving employment in a large sector with well-organized labor as well as the specifically
“strategic” status that had historically been accorded to the steel industry. Steelmaking had long been
considered a matter of national pride, as illustrated by the industry saw that the two major
investments that were de rigueur for every newly independent nation were a national airline and a
steel plant.16 As a result, 60% of the world’s steelmaking capacity was government-owned in the
1980s.17

Since then, much of this capacity had been privatized, especially in post-communist countries—
part of a broader cross-industry privatization wave worldwide—and government-owned steel
capacity had declined to 40% of the world total. 18 These privatizations provided a basis for increased
cross-border integration through foreign direct investment (FDI) instead of just trade. U.S. Steel’s
acquisition of a steel plant in Kosice, Slovakia, supplied one example: the acquisition raised the share
of non-U.S. production in the company’s total from virtually nothing to nearly 30%—and later helped
keep the company afloat during difficult years at home. Arcelor, the European steel giant and the
second largest steelmaker in the world was formed in 2002 when three formerly state-owned
European steel companies from three different countries were combined: Aceralia (Spain), Arbed
(Luxembourg), and Usilor (France). Arcelor also appeared, however, to be hedging its bets about
inter-regional expansion: thus, it had formed an alliance with Nippon Steel of Japan, the fourth
largest steelmaker in the world, to serve (high-end) global customers.

By far the most dramatic example of growth by acquisition of (primarily) steelmakers being
privatized, in terms of its geographic scope as well as absolute scale, was Mittal Steel, which had
come from virtually nowhere to become the largest competitor in the steel industry with a strategy
that emphasized acquisitions, particularly of steel mills that were being privatized. One perspective
on the scale of Mittal’s M&A activities was provided by 2004, a record year for mergers and
acquisitions in the steel industry as a whole, with a total of transactions worth €25.3 billion. Mittal
Steel accounted for two-thirds of that with a two-stage transaction involving the €10.7 billion merger
of LNM Holdings and Ispat International and the €3.6 billion acquisition of the International Steel
Group in the United States to create Mittal Steel (the top 2 steel deals of the year) as well as a number
of smaller transactions.19 And while 2004 was an exceptional year, Mittal would clearly again top the
2005 transaction tables with its acquisition of Kryvorizhstal—as it had in most recent years.

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Exhibit 4 provides summary operating and financial data for Mittal Steel and its 9 largest
competitors worldwide in 2004, and Exhibit 5 breaks out summary operating and financial for Mittal
Steel by region over 2002–4. Exhibit 6 provides one industry consultant’s subjective summary
assessment of Mittal’s competitive position relative to its largest competitors. The rest of this case
describes Mittal Steel’s evolution over time, how it was managed and organized, and its vision as to
how it would sustain superior performance in the future.

Mittal Steel’s Evolution

LNM’s father, Mohan Lal Mittal, had founded the Ispat Group—Ispat meant steel in Sanskrit—in
Calcutta, India, to trade scrap metals.20 Upon graduating from college in 1970, LNM joined the family
business and was involved in setting up a new steel plant in Calcutta before being asked to oversee
the export business in South East Asia. In 1976, the elder Mr. Mittal had bought some land in
Indonesia with the goal of building a steel mill there; however, he subsequently changed his mind,
and dispatched LNM there with the charge of re-selling the land. When he arrived in Indonesia,
however, LNM was struck by the prospects of imminent growth in the Indonesian economy, which
would boost demand for steel; he successfully convinced his father to stick with the original plan of
making steel there, and stayed on to take charge of the mill.

However, the original idea of building a traditional scrap-based minimill did change under LNM,
who had always worried that traditional minimills’ reliance on scrap steel as exclusive input would
prove to be their Achilles’ heel. LNM decided to invest in a 65,000 tpy DRI (direct reduced iron) plant
alongside the new minimill, even though DRI was a fledgling technology at the time that could not
provide consistent quality levels. Over the years, as DRI technology improved and became more
reliable, LNM’s trust in it as a viable alternative to scrap grew—indeed, he began to refer to his
minimills as “integrated minimills,” i.e., mills that used electric arc furnaces but integrated backward
into DRI production. By the late 1990s, one analyst described Ispat/Mittal’s lead in DRI as “virtually
insurmountable for the foreseeable future,” given that DRI was complicated and hard to copy.21

As its steelmaking capacity was expanded, LNM’s Indonesian mill came to rely on external
suppliers of DRI as well. One such supplier was Iscott, which was owned by the government of
Trinidad and Tobago. Built in 1981 by the state at a cost of $460 million, Iscott was in severe financial
trouble by 1988, with 25% capacity utilization, and weekly losses of $1 million since 1982. As a
customer of Iscott’s, LNM was very familiar with its problems, but could also see the potential value
that could be unlocked by better management. When the government of Trinidad & Tobago invited
him to make a bid for the troubled plant, LNM had no hesitation in expressing interest. However, he
did not have the funds to make an offer for outright purchase; instead, he suggested a 10-year lease at
$11 million a year with the option to buy in the fifth year at an independently appraised price. The
Trinidad government agreed, and LNM quickly embarked on his first turnaround. He brought in 55
DRI experts and managers from around the world, and pumped in nearly $10 million of new
investment in the first three months. Production bottlenecks were remedied and quality rapidly
improved; by the end of the first year, the operation made a small profit after paying for the lease.
With viability regained, Caribbean Ispat was able to secure World Bank financing that allowed it to
increase capacity by 50%. In May 1989, LNM acquired the plant for a price of $70 million.

The Trinidad experience taught Mittal that a SWAT team of managers and technology experts,
along with a rapid investment program, could turn around such assets fairly quickly, even if the
assets themselves had long lives. The next few acquisitions also focused on troubled state-owned
steel plants using DRI/EAF technologies (see Exhibit 7 for a history of Ispat/Mittal’s major
acquisitions and Exhibit 8 for a financial and operational history). The first, in Mexico, involved a 2.5
million ton steel mill that had cost $2.5 billion and had been started up in 1988, but was running at

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barely one-quarter of its capacity and losing $1 million per day. Mittal stepped in to run it, with the
understanding that he would acquire it over time—which, having turned it around quickly, he did in
January 1992, for $220 million.

The large new plant in Mexico generated so much cash as to fund investments of comparable
magnitude in state-owned DRI/EAF steelmakers in Canada and Germany in late 1994/early 1995.
Roughly at that time, LNM and his father agreed to separate Ispat International, LNM’s operation,
from Ispat Industries, the original family business in Calcutta.22 LNM moved his residence and his
corporate office to London, registering the LNM group in Rotterdam. Also in 1995, he paid about
$500 million for Kazakhstan’s Karmet mill, which had 6 million tons of truly integrated liquid steel
capacity that came with not just blast furnaces but large iron ore and coal mines, power plants, and
even some of the social infrastructure (e.g., trams and some schools) for a town with more than
100,000 inhabitants. Described by a Fortune magazine writer as a “Communist catastrophe,”23 the
integrated complex employed 70,000 workers—making it Kazakhstan’s largest private employer—
and produced low-quality steel for the Kazakh and Russian economies. The deal, LNM’s largest to
date, won great attention, not all of it favorable. Robert Jones, the steel editor at Metal Bulletin was
quoted as saying later: “When he went to Kazakhstan, I thought either he was nuts, or saw things
very differently.”24

What Mittal saw at Karmet were very low labor costs ($250–$300/month), large, rich mineral
deposits, location on a railway grid, a booming market in China, whose western border was just 400
miles away and intense personal interest by Kazakh President Nazarbayev, who had started his
career as an engineer at the company, in ensuring that the privatization worked. An injection of
working capital helped get the plant off the barter system to which it had been reduced as well as
funding the payments of back wages to workers, significant investments were made to debottleneck
and expand output, otherwise reduce costs, and upgrade the product mix, and new markets in China
and Iran were developed (35% and 15% of 2003 sales, respectively). According to Mittal, it invested
$700 million on top of the initial purchase price in Karmet by 2003 (some of it financed by
development finance institutions). That year, Karmet shipped 3.75 million tons of steel products and
reported generating $1,189 million in revenues while having pushed operating costs down to the
amazingly low level of $126/ton.a And while mass layoffs had been ruled out by the terms of the
deal, Karmet’s headcount had fallen gradually, to just over 50,000 employees.

In 1997, Ispat International, comprising some of LNM’s steel assets, went public in an IPO but
others, including the Karmet complex, were retained by his privately-held vehicle, LNM Holdings. A
series of other acquisitions followed, initially through Ispat International but starting in 2001 via
LNM Holdings, in apparent breach of an undertaking at the time of Ispat’s IPO that it would carry
out all future acquisitions. In July 1998, in another transaction that dwarfed all previous ones, Ispat
acquired Inland Steel in the United States, with 4 million tons of capacity, for $1.4 billion plus a
planned $800 million in additional investment. While this acquisition brought Ispat higher-end
business in and skills associated with the automotive sector in particular, its results were considered
mixed. Part of the problem was that rivals such as Bethlehem managed to lighten the load of pensions
and other liabilities through bankruptcy-based reorganizations.

LNM Holdings went back on the acquisition trail in 2001, and looked outside the Americas: it
focused on East Europe, with large acquisitions in Romania, the Czech Republic, and Poland, and
smaller ones in Macedonia and Bosnia, but also made large acquisitions in Algeria and, especially,
South Africa. One of the Romanian acquisitions also brought in its wake some unwelcome
controversy. A few months after LNM Holding’s acquisition of Sidex, it was revealed that British

a The comparable total revenue and operating cost figures for 2002 were $869 million and $114/ton respective. Figures for 2004
were unavailable, but steel prices around the world were generally $100–$200 higher in 2004 than in 2003.

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Prime Minister Tony Blair had written a letter to his Romanian counterpart, Adrian Nastase, in
support of LNM’s bid. According to some reports, Blair’s letter helped “trump” a bid by Usinor of
France (one of Arcelor’s predecessors). 25 This issue became a major political controversy in the United
Kingdom, especially when it turned out that LNM had made a contribution worth £125,000 (€200,000)
to Tony Blair’s Labor Party during the previous month. The Blair government denied any
impropriety in the matter, arguing that the whole story began with a suggestion from the British
Ambassador to Romania that they should support this British bid. This opened up a new area of
debate, about whether LNM Holdings was indeed a British entity: it was registered in the
Netherlands Antilles, had only 50 employees in London (out of a worldwide total of 100,000 across
LNM and Ispat), and LNM Group turnover in the United Kingdom was not quite 2% of worldwide
revenues. While declining to be formally interviewed, LNM was reportedly outraged by the negative
press, insisting that:

I have absolutely nothing to hide. I have a very strong British identity. I have British
companies with a turnover of nearly £40m a year. What is more, I have settled here and raised
my family here. I pay tax here. It’s true I run a multinational group but I have no business
interests in India. So please tell me, what should my identity be?26

Ispat International and LNM Holdings were folded back together in the course of the merger with
Wilbur Ross’s International Steel Group (ISG) in the United States, announced in 2004 and completed
in 2005, that created the world’s largest steelmaker by volume. Wilbur Ross, a veteran investor in
distressed properties, had assembled ISG in 2002 out of the bankrupt steelmaker LTV and other U.S.
steelmakers. Taking advantage of bankruptcy regulations, ISG purchased the assets while only
assuming specific liabilities—in particular, the buyer would be free of the legacy costs of pension
liabilities and other post-employment benefits such as retiree healthcare. (The federal agency Pension
Benefit Guaranty Corporation took over the pension liabilities, although not the retiree healthcare
programs.) By 2004, ISG was one of the largest integrated steel producers in North America. ISG’s
acquisition for €3.4 billion by what became Mittal Steel richly rewarded its investors: ISG shares,
which had been trading at less than €23, were exchanged for €16 in cash and €16 in Mittal Steel
shares. Concurrently, LNM Holdings was absorbed, along with Ispat International, into a publicly-
listed entity, Mittal Steel. This involved the payment of a €1.5 billion dividend to the sellers of LNM
Holdings. The Mittal family continued to own 88% of the shares of the merged entity.

Management and Organization

Mittal Steel emphasized discipline in the deal-making, turnaround, and value creation processes.
Over the years, Mittal appeared to have introduced a number of managerial practices that were novel
to the steel industry—aided by LNM’s injection of non-steel mindsets into his executive team, as
illustrated by his choice of Roeland Baan from oil major Shell to run Mittal Steel Europe. The overall
approach had been characterized as resembling that of a private equity firm more than a traditional
steelmaker.27

Dealmaking
Mittal focused its acquisitions on the steel industry (and stages upstream), despite the fact that
Business Week had suggested that “the Mittal Method is less about steel than about smart practices.” 28
Promising targets were subject to a rigorous due diligence process. A small team, highly experienced
in steelmaking as well as dealmaking, would visit the company to assess the seller’s expectations and
the viability of the assets. Unless the target demonstrated reliable labor and energy supply, Mittal
would not proceed. The due diligence process focused, in addition, on people. In the words of,
Johannes Sittard, a former COO, “We use due diligence to learn about the people who are running

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the company and to convince them that joining Ispat is an opportunity for them to grow. These
conversations provide information you will never find in a data room.”29

In the next stage of this gated approach, Mittal Steel worked with the target’s management to
develop a five-year business plan to provide an acceptable ROI. The deal team was drawn from a
core team of 12–14 London-based professionals who had mostly worked together since 1991 and
therefore knew each other well. The deal team managers developed a document that detailed the
investment thesis and the strategic options; if the deal was approved, this document became the
turnaround roadmap.30 And since the deal team managers (from Mittal Steel) knew that they might
end up running the acquired unit, they had an incentive to remain realistic with respect to the
assumptions made in their projections.

Another noteworthy aspect of Mittal’s approach was a patient attitude to deal-making that
emphasized a slow but steady build-up of credibility and relationships that often started well before
any acquisition and could make Mittal the preferred suitor when a deal was near. Its first two
acquisitions, in Trinidad and Mexico, fit this pattern as two relatively large recent ones, in South
Africa and China. In 2002, Mittal Steel took a 35% stake in South Africa’s Iscor, agreeing to supply it
with technology and services as well as to help support other South African government policies. 31
Two years later, Mittal assumed full control. Mittal’s recent investment in China seemed to be
following a similar sequence: a 37% stake in Hunan Valin Steel Tube & Wire Co. was obtained just
before the Chinese government declared in a new policy that foreign control of a steelmaker would
not be permitted “in principle.” Mittal Steel was hopeful that this restriction would be relaxed over
time. In the words of Aditya Mittal, LNM’s son as well as Mittal Steel’s president and CFO, “We want
to demonstrate to the Chinese government that we can be a responsible partner. Once they have seen
how we behave and how we are improving the company, I’m sure there will be more opportunities
for us.”32

Mittal sought to add value to this partnership through a variety of mechanisms, ranging from
leveraging global purchasing clout to get Valin better iron ore prices to starting to give some Valin
executives two-year postings at other Mittal Steel plants around the world. Mittal also promised to
license technology for some of its best products, a key Chinese requirement, and donated €4.2 million
to a university in Valin’s home town. But even while aggressively courting Valin in 2005, Mittal Steel
had in place a nonbinding memorandum for a €84 million plant in the Northeast, which was being
“evaluated.” Aditya Mittal was quoted as saying, “Valin is not exclusive. We see the possibility of
other partners.”33

Turnaround and Integration

Once the deal had closed formally, it was time to move on to the difficult task of turning around
the acquired operation. Mittal Steel’s managers believed that they had established a solid track record
at improving the efficiency of previously poorly managed steel mills (see Exhibit 9 for illustrative
cost reduction numbers). The turnaround team would oversee this part of the process as well,
spending six months or more in each location, before handing over the stabilized operation to a new
set of managers and moving on to the next acquisition—which gave it a broad understanding of the
range of problems involved in steel turnarounds. Thus, Augustine Kochuparampil, CFO of Mittal
Steel Poland, remarked that half the issues were similar across turnaround situations. 34 In particular,
the problems of previously state-run steel companies were typically concentrated in finance or
marketing, not in technical or engineering areas.

What Business Week termed the Mittal Method had six key steps:35

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1. Mittal would replace most incumbent managers with his own executives, charged with
rapidly stabilizing the company’s operations, except where management of the acquired
company was willing to commit to and seemed capable of meeting very aggressive targets,
set by benchmarking to international rather than local standards.

2. A substantial cash infusion would be made, and credit with suppliers re-established to
ensure a steady flow of raw materials. In Poland, for example, the new CFO personally called
on angry creditors and suppliers to regain their confidence. Eliminating barter deals, which,
while common in many state-run economies, engender corruption and negatively impact
cash flow, was another priority.

3. Once the commercial operations are stabilized, attention would turn to technical matters.
Mittal Steel’s top engineers would be brought in to improve operations across the board,
including reworking maintenance schedules to reduce downtime.

4. In terms of products and marketing, production was typically shifted to higher-value items,
and there was an emphasis on selling to end-users rather than to middlemen.

5. In the next step, integration involved, first, connection of the new plant to global systems
and, over a longer time frame, to the global network.

6. The final step, also often implemented over a longer time frame, was to prune the acquired
assets, getting rid of non-core operations, as well as gradually cutting back on staff, often
through buyout programs.

Overall, there was a relentless emphasis on rapid, demonstrable results: on stabilizing operations
and achieving profitability within months, rather than years. All of this took place in environments
with which most Mittal managers, many of them originally from India, were unfamiliar. Among the
executive team, the number of interpreters employed in a unit was an informal measure of how well
the integration was going—the fewer the number of interpreters, the better. 36 Thus, Mittal Steel
Poland’s CFO, Kochuparampil tried to get all English-speaking managers to learn Polish, himself
putting in two hours of lessons every weekend.37 Systematic efforts to learn from each acquisition
were also part of the process; as Johannes Sittard put it: “We are a small team, and acquisitions are
much of what we do, so post-acquisition assessments are a permanent part of our conversations.”38

Ongoing Value Creation

The principal focus in the dealmaking and turnaround stages fell on one-time value creation,
principally by “importing modern management techniques into previously inefficient state-run
mills.”39 That left open the question of how, once each individual plant was running smoothly and
profitably, Mittal might be able to add further value. Or as some observers put it, how was Mittal
going to progress beyond a private equity business model into becoming the world’s first true steel
multinational: a company that added value on an ongoing basis by coordinating its operations across
individual countries?

Regional integration was one obvious answer: grouping operations in adjacent countries enabled
them to extract better terms from suppliers of iron ore, coal, and power, helped ensure that they did
not compete for the same customers, and enhanced the reliability of supply. 40 The concentration of
acquisitions by LNM Holdings in Eastern Europe between 2001 and 2004 had been premised on just
such logic, and had started to be acted upon. Thus, after the acquisition of Polskie Huty Stali in
Poland, LNM announced a common senior management team for the plants in Poland and the Czech

9
PG0-002 Mittal Steel in 2006: Changing the Global Steel Game

Republic which, in addition to being in neighboring countries, relied on common iron ore sources
from the Ukraine.

Coordination at the global level was complicated by the 25-nation global footprint. Nevertheless,
Mittal Steel had installed some coordination and communication tools that were beginning to attract
broader attention, such as e-rooms: on line “war rooms” for managers worldwide to post problems
and solutions. Even more important were regular conference calls, which would last for several
hours.41 Every Monday, as many as 120 line managers from around the world would join Mittal’s top
executives in London and discuss (and share information about) prices, customer issues, and
performance. Malay Mukherjee, Mittal Steel’s COO, explained the rationale:

We created the Monday call seven or eight years ago. We have 20 sites, and you have the
manager taking the call and five or six of his people listening in. We made it the first day of the
working week so everyone has to be fully prepared, even on events that have happened over
the weekend.42

The conference call on Monday was followed by another on Tuesday that focused on operational
problems—production, quality, maintenance, bottlenecks, etc.

A forerunner of these calls was the Knowledge Integration Program (KIP), an early Mittal initiative to
“keep stirring the whole organization.”43 The KIP involved twice-yearly meetings in which
(operating and staff) functional representatives from all Mittal Steel plants would meet for 2–4 days
to review performance against targets, highlight accomplishments and setbacks, discuss technical
issues of common interest, update each other on developments in their respective areas, and jointly
commit to future targets.44 The venue would rotate among the various plants, and the agenda was set
in consultation with the functional heads. Apart from being an informational forum, the KIP
meetings facilitated the creation and nurturing of interpersonal networks. As one manager from
Mexico put it: “If I have a question, I don’t have to wait until the next KIP meeting. I can make a
phone call or send an email to Canada or Trinidad. I probably exchange at least one email every week
with them.”45 An expanded Knowledge Management Program (KMP) also grew up out of KIP. In
2004, nearly 25 meetings, with over 500 managers attending, were held worldwide under the KMP.46

Of course, LNM himself served as a key coordinator: he routinely logged over 350,000 miles a year
of travel. And yet, some of his executives were beginning to say that they didn’t see as much of him
as they used to earlier.47 The personal as well as organizational costs of coordinating an increasingly
far-flung operation were clearly multiplying. This sharpened the question of whether Mittal Steel was
worth more than the sum of its parts once each piece had been restructured.

Strategic Vision
While LNM had reason to be proud of his team’s track record at turnarounds, he knew that Mittal
Steel had reached an important turning point in its evolution. Before he bought ISG in 2004, almost
75% of his then 40-million ton capacity was the result of privatization-related acquisitions of
inefficient Soviet-era plants48 Overwhelming though their problems were, turning around such
derelict operations was, by now, fairly straightforward to a team that had done it may times already.
However, ISG was a different story altogether: Mittal had bought it from another master at
turnarounds, Wilbur Ross, and it was not clear how much more stand-alone efficiencies could be
squeezed out of ISG49. The 42% premium paid for ISG also raised the bar for transaction returns. Not
surprisingly, some observers were privately beginning to wonder if Mittal had run out of “low-
hanging fruit,” i.e., run out of quick-hit opportunities to create value through restructuring—
speculation that was fuelled both by recent winning bids (e.g., Kryvorizhstal) and losing bids (e.g.,

10
Mittal Steel in 2006: Changing the Global Steel Game PG0-002

Erdemir in Turkey where, despite owning 8% of the company, Mittal found itself beaten by a rival
willing to bid more than €982/ton of steel production).

Global Consolidation
The principal strategic rationale that Mittal had long offered for its international expansion had to
do with the importance of global scale and scope, broadly defined: according to the company’s
website, it was founded on the philosophy “that to be able to deliver the range and quality of
products customers demand the modern steel maker must have the scale and worldwide presence to
do so competitively.”50 The benefits of being big were supposed to include risk-reduction as well as
the improvement of the poor industry structure described in the “World Steel Industry” section of
this case. Thus, according to LNM, “Consolidation of our industry has already started, but it is
important that it continues so that we can move away from being seen as a volatile and erratic
sector.”

COO Malay Mukherjee noted that a company with one blast furnace would have trouble shutting
it in a downturn but that a company with 20 might be able to idle one or two. 51 He also provided
some other indications of the role that consolidation might play in increasing industry attractiveness
by increasing vertical bargaining power:

Iron ore has for many years had pricing set on the basis of international benchmarks, which
have been negotiated annually. In contrast, steel has no global benchmark pricing
mechanism…One driver of the difference between iron ore and steel pricing is that the iron ore
suppliers are much more consolidated and the major players treat the world as one
market…The more fragmented a market, the less transparency and the greater the likelihood
of poor capacity management.”52

Despite initial skepticism, there were some indications that other major steelmakers were
beginning to buy into the logic of global consolidation. As Guy Dollé, CEO of Arcelor, who was
broadly supportive, noted, “Mittal has had a vision for the industry that goes back a long way, well
before the majority of his peers.”53 Support for this point of view derived from the fact that Mittal
itself had boosted its share of global steel output from less than 1% in 1995 to 6% by 2004 as well as
helping increase the share accounted by the top 5 steel producers from 13%—where it had more or
less stagnated since 1980—to nearly 20%.

Looking forward, LNM had increased the concentration levels associated with his “global
consolidation” vision: while he had originally envisioned a handful of steelmakers with 50–60 million
tonnes of capacity each, as Mittal Steel grew past that level, his vision had shifted to an industry with
5–6 megamajors with 80–100 million tonnes of capacity each. And as he was fond of pointing out,
Mittal Steel intended to be the first to get there.

Vertical Integration
Mittal Steel had always paid considerable attention to upstream inputs, as evidenced by its
involvement from the beginning in the development of DRI as a substitute for scrap. But vertical
integration had recently become far more visible in the company’s pronouncements about its
strategy, partly because of the raw material price increases experienced by the steel industry in the
course of the recent boom: between 1994 and 2004, the cost of coal increased from about €28 to €44
per ton, the cost of natural gas went from €72 to €129 per ton, and the cost of iron ore went from €22
to €31 per ton.54 Against this backdrop of high prices, LNM had recently begun to signal the need for
“re-integrating” the industry vertically. In a May 2005 presentation to investors, Mittal Steel provided
numbers suggesting a unique raw materials integration position relative to its peers—Mittal Steel’s

11
PG0-002 Mittal Steel in 2006: Changing the Global Steel Game

iron ore integration level was 43% versus 12% average for the top global producers, and coal
integration level was 52% versus a 1% average for the peer group (see Exhibit 10).

Looking at the country level rather than at the company level seemed to suggest that such
uniqueness might indeed be very valuable. Thus, Mittal Steel’s cross-country analyses indicated that
variations in raw materials costs were key drivers of variation in steelmaking costs (see Exhibit 11).
LNM also had a general sense that raw material considerations actually were beginning to drive steel
firms’ strategies in ways that were unprecedented. Much of the world’s iron ore came from Brazil,
India, and Australia. As economic development gathered pace, many of the traditional supplier
nations were beginning to want to add more value at home, i.e., to beef up local steelmaking rather
than export most of their iron ore. For instance, the ex-Soviet CIS nations held almost 34% of the
world’s iron ore reserves, but accounted for only 10% of world steel production. In India, which was
estimated to have significant reserves of high quality iron ore (5.3% of world reserves), but only
produced about 36 mmt of steel, the government was negotiating with several steelmakers in parallel
(including Mittal Steel and South Korea’s Posco) to build multiple 12 million ton capacity steel plants,
with mineral rights being one of the key determining variables. Similarly, China’s steel producers
were venturing abroad in a purposeful search for secure raw material suppliers.

LNM noted that the purchase of Kryvorizhstal, in the Ukraine, could at least partially be justified
in such terms. Kryvorizhstal was located within a large iron ore mine complex with over a billion
tonnes of iron ore reserves. The plant was also almost fully self-sufficient in coke requirements. Thus,
access to low-cost captive raw material sources was assured and, upon closing the acquisition, Mittal
Steel would become the world’s fourth largest mining company if company-wide captive mining
operations were added up. In addition, of course, there were the debottlenecking opportunities
implied by imbalances and underutililized capacity at different vertical stages: although
Kryvorizhstal’s crude steel capacity was 10 million tpy, it had a rolling capacity of only 6 million tpy
and was currently rolling only 4 million tpy of 7.6 million tpy production level into finished steel; the
rest was turned into less attractively priced “re-bar” (reinforcing bars) for construction and other
markets. Mittal Steel also estimated initial synergies in the region of €162 million by about 2007,
spread equally between marketing and purchasing, and the possibility of improving labor
productivity at the rate of 5% per year up to 2010.

One of the open questions that LNM had to deal with was about the value of vertical integration:
Not all steel industry leaders were convinced of the merits of vertical integration. Thus, although
Arcelor had secured the position of the leading producer in Brazil and was also focused on Russia,
India, and China (it planned to build up these four countries to more than 50% of its sales), it was
dubious about vertical integration per se. In the words of CEO Guy Dollé,

For steelmakers, it is worth[while] to distinguish access to raw materials from ownership of

mines. One can, as we do at Arcelor, have a good and stable delivery of raw materials without
owning the mines. This mining business faces much higher capital intensity than steel
industry, and the business models are different. There is no need to increase the load of the
steel vessel. There is no economic advantage to be integrated, unless transferring results from
upstream to downstream.

Arcelor’s own country-level analyses pointed to workforce costs being the largest drivers of variation
in steelmaking costs (see Exhibit 12).

Such skepticism was understandable since the steel industry had gone through previous cycles of
vertical integration and de-integration. For example, in 2001, U.S. Steel had famously reversed a
century of vertical integration by selling off many of its raw material holdings. Moreover, LNM was
aware that conventional wisdom held that vertical integration through financial ownership did not

12
Mittal Steel in 2006: Changing the Global Steel Game PG0-002

make much sense as a response to high input prices. Yet LNM worried that the problem might not
reflect just a transient hike in raw material prices. Upon analysis, the steel industry’s bargaining
position vis-à-vis its raw material suppliers seemed to him almost as disadvantaged as its bargaining
position vis-à-vis its automotive customers. Thus, the top 5 iron ore producers accounted for over
40% of iron ore, while the top 5 steelmakers accounted for less than 20% of the market 55 If this was a
permanent problem, vertical integration seemed to be the obvious solution, at least to him. However,
he needed to consider carefully how to craft his message to investors and analysts.

Girding for the fight ahead

It was clear, however, that the implications of the Kryvorizhstal acquisition would pale in
comparison to the hostile bid that was about to be announced. LNM had approached Arcelor’s chief
executive, Guy Dollé, on January 13—at dinner in Mittal’s palatial London home—with a proposal
for a friendly deal, which was rebuffed. Mr. Dolle “saw difficulties with the plan.” Subsequently, Mr.
Dolle canceled their next meeting and then did not return his phone call. 56 Moreover, although
Arcelor shareholders were mainly institutions—who were in general quite willing to swap shares at
the right price—its ownership and employment stakes were diffused through Luxembourg, France
and Belgium. Indeed, some French officials showed concern right away, saying they heard the
surprise news on the morning of January 27, with no prior warning. 57 Mittal Steel’s investment
ratings could be adversely affected if it ended up paying too much for Arcelor. A Fitch Ratings note
later pointed out that while Mittal’s ratings were high for the steel industry, “there are numerous
risks surrounding the acquisition plans, including the high likelihood the price will need to be
raised.”58 If a higher price had to be paid, it was not clear how much additional money Mittal Steel
would be able to raise. The initial offer was based on a €5 billion bank loan put together by Goldman
Sachs and Citigroup, and the company would have €11.5 billion in debt if the deal went through 59.
Finally, there was the issue of Dofasco, the Canadian steelmaker that Arcelor had recently acquired
after beating out ThyssenKrupp in a bidding competition. Given that Mittal Steel already had a high
market share in North America, the combination would almost certainly face anti-trust hurdles in the
US and Canada. One solution would be to sell Dofasco upon the completion of the proposed merger.
At the press conference announcing the bid for Arcelor, it was revealed that LNM had called
Ekkehard Schulz, ThyssenKrupp’s chief executive, on Tuesday, January 24—after learning that
Arcelor had won the Dofasco bid—to offer Dofasco to Thyssen for 68 Canadian dollars a share (as
against the 71 Canadian dollars that Arcelor had paid), assuming that Mittal gains control of
Arcelor—which was by no means a certainty. Whatever the eventual outcome, the next few months
were sure to be interesting.

13
PG0-002 Mittal Steel in 2006: Changing the Global Steel Game

Exhibit 1 Value Line Industry Groups

ROE-Ke Spread
20% Toiletries/Cosmetics
Drug
Soft Drink
15%
Tobacco
Food Processing
10% Household Products
Electrical Equipment
Financial Services
Specialty Chemicals
5% Newspaper Integrated Petroleum Electric Utility - East
Bank Retail Store
Telecom
0%
Tire & Rubber
Electric Utility - Central
(5%) Medical Services
Machinery
Auto & Truck
Computer & Peripheral
(10%) Paper & Forest
Air Transport
Average Invested Equity ($B) Steel
(15%)
0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300

Source: Compustat, Value Line, and Marakon Associates analysis, as reproduced in Ghemawat, Strategy and the Business
Landscape, 1999.

Exhibit 2 Top 10 Steel Producers’ Return on Invested Capital (ROIC) and Weighted Average Cost
of Capital (WACC)

30
ROIC
25
WACC

20
Percent

15

10

0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: Mittal Steel Fact Book 2004.

14
 PG0-002 -15-

Exhibit 3 Apparent Steel Consumption Growth Rates (year-on-year changes)

Long Products: China

Hot-Rolled Band: China

Hot-Rolled Band: Rest of World Long Products: Rest of World

Source: Peter F. Marcus and Karlis M. Kirsis, “Chinese Steel: Facts and Forecasts, 2002-2010,” World Steel Dynamics, April 2004, p. 18.
PG0-002 Mittal Steel in 2005: Changing the Global Steel Game

Exhibit 4 Top 10 Steel Producers, 2004

Mittal Arcelor Nippon JFE POSCO

Crude steel production (m tonnes) 59 50.6 31.4 31.1 31.1
Revenues/ton (€) 436 684 665 634 617
Implied operating costs/ton (€) 339 611 569 553 480
Operating income/ton (€) 97 72 96 81 137

Bao Steel U.S. Steel Corus Nucor Thyssen Krupp

Crude steel production (m tonnes) 21.4 20.8 19.9 17.9 17.6
Revenues/ton (€) 490 525 481 472 833
Implied operating costs/ton (€) 374 466 448 395 762
Operating income/ton (€) 117 59 32 76 72

Source: Mittal Steel.

Exhibit 5 Mittal Steel’s Operations by Region, 2002–4

Americas Europe Asia/Africa

2002 2003 2004 2002 2003 2004 2002 2003 2004
Crude steel production (m tonnes) 10.7 10.6 28.2 8.2 10.8 17.6 5.9 6.0 13.2
Revenues/ton (€) 287 308 437 212 284 452 202 308 468
Implied operating costs/ton (€) 276 298 332 211 261 362 137 213 321
Operating income/ton (€) 11 10 105 1 23 90 65 95 147

Source: Mittal Steel.

16
 PG0-002 -17-

Exhibit 6 April 2004 Positioning of 10 World-Class Steelmakers by Factor Weight

LNM Group† POSCO Nippon Steel JFE U.S. Steel Thyssen/Krupp Nucor ISG Bao-Steel Anshan Steel Avg.
Country S.K. Japan Japan USA Germany USA USA China China
Annual Steel Shipments (million tonnes) 31 29 26 23 18 16 15 14 11 10 19.3

Factor Weight
Cash operating costs 11% 6 9 6 6 4 4 5 7 8 7 6.2
Profitability in 2000-2003+A9 8% 5 10 3 3 2 4 6 3 10 6 5.2
Balance sheet 7% 3 9 5 3 5 4 10 8 8 5 6.0
Dominance country/region 7% 6 10 7 6 5 4 5 5 7 4 5.9
Domestic market growth 6% 6 6 2 2 2 3 2 2 10 10 4.5
Harnessing technological revolution 5% 5 9 7 7 5 7 10 5 7 7 6.9
Access to outside funds 4% 4 10 7 6 4 5 10 8 9 7 7.0
Cost-cutting efforts 4% 10 6 9 10 8 7 6 8 7 9 8.0
Downstream businesses 4% 3 6 10 9 3 7 9 2 2 2 5.3
Environment and safety 4% 9 9 9 9 9 9 9 9 9 9 9.0
Expanding capacity 4% 7 4 1 1 2 1 10 3 8 10 4.7
Iron ore and coking coal mines 4% 4 3 3 2 7 2 - 4 4 6 3.9
Liabilities for retired workers 4% 4 7 4 4 5 6 10 10 8 6 6.4
Location to procure raw materials 4% 5 8 8 8 7 5 6 5 7 7 6.6
Alliances, mergers, acquisitions and JVs 4% 10 8 9 10 10 9 10 10 9 5 9.0
"Pricing Power" with large buyers 4% 6 10 8 8 5 6 3 5 8 4 6.3
Product quality 4% 5 10 10 10 8 9 6 7 8 5 7.8
Skilled and productive workforce 4% 6 10 10 10 8 9 10 8 7 6 8.4
Stock market performance (3-year) 4% 5 7 5 5 9 3 6 6 7 9 6.2
Threat from nearby competitors 4% 5 8 7 7 5 4 4 5 5 4 5.4

1 = least favorable* 10 = most favorable*

* Many of these ratings are subjective and some are duplicative.

†
Plants in many countries, includes Ispat International.

Source: Adapted from Peter F. Marcus and Karlis M. Kirsis, “Chinese Steel: Facts and Forecasts, 2002-2010,” World Steel Dynamics, April 2004, p. 13–14.
 PG0-002 -18-

Exhibit 7 History of Mittal Steel Acquisitions

 PG0-002 -19-

Exhibit 8 Ispat/Mittal Financial and Operating History

PG0-002 Mittal Steel in 2006: Changing the Global Steel Game

Exhibit 9 Post-Acquisition Cost Reductions

Exhibit 10 Raw Material Positions in 2004

60%
Mittal
Average of Top Global 52%
Producers
50%

43%

40%

30%

20%

12%

10%

1%
0%
Iron ore integration level Coal integration level

Source: Mittal Steel Investor Roadshow Presentation, May 5th 2005.

* Top global steel producers, excluding MittalSteel and Nucor, includes Arcelor, Nippon Steel, JFE, POSCO, Baosteel,
CorusGroup, U.S. Steel, and ThyssenKrupp

**MittalSteel 2004 excludes ISG.

20
Mittal Steel in 2006: Changing the Global Steel Game PG0-002

Exhibit 11 Mittal Steel Assessment of Across-Country Cost Differences

Source: Mittal Steel Investor Roadshow Presentation, November 10th, 2005.

Exhibit 12 Arcelor’s Assessment of Across-Country Cost Differences

Source: Adapted from “Steel a long way from globalization,” presentation made at University of Pittsburgh conference on
globalization in the steel industry, April 2004.

21
PG0-002 Mittal Steel in 2006: Changing the Global Steel Game

End Notes

1 World Steel Dynamics, Truth or Consequences #28, page 51.

2 New York Times, January 28, 2006, “Mittal Steel makes bid for a rival.”
3 New York Times, January 28, 2006, ibid.
4 The Independent, October 25, 2005, “Mittal Splashes out £2.7 billion for Ukraine’s Biggest Steel Producer.”
5 The Independent, October 25, 2005, ibid.
6 Arcelor press release, 24 October 2005.
7 Metric tonnes per year.
8 http://biz.yahoo.com/ap/051024/ukraine_privatization.html?.v%3D17, last accessed November 30, 2005.
9 http://www.guardian.co.uk/ukraine/story/0,15569,1599972,00.html, last accessed November 30, 2005.
10 This section draws heavily on HBS case 9-793-039 “Nucor at a Crossroads,” by Pankaj Ghemawat and

Henricus J. Stander III.

11
Wall Street Journal, October 5, 2005, p. B3J, “Mittal Steel Plans Plant in India After Buying Part of Chinese
Firm.”
12 Ispat International, 1997 Annual Report, p. 14.
13 Peter F. Marcus and Karlis M. Kirsis, “Chinese Steel: Facts and Forecasts, 2002–2010,” World Steel Dynamics,
April 2004.
14
Jinghai Liu, presentation on Chinese steel markets, University of Pittsburgh Workshop on the
Globalization of the Steel Industry, April 2004.
15
“World Steel Demand,” presentation by Armand Sadler, Chief Economist, Arcelor, at University of
Pittsburgh Workshop on the Globalization of the Steel Industry, April 2004.
16 Wall Street Journal, November 21, 2005, p. R9, “Steel: Putting the Pedal to the Metal.”
17 Wall Street Journal, November 21, 2005, ibid.
18 Wall Street Journal, November 21, 2005, ibid.
19 PriceWaterhouseCoopers, “Forging Ahead: Mergers and Acquisitions Activity in the Global Metals
Industry, 2004.”
20 LNM’s
early history is based on Don Sull (1999), “Spinning steel into gold: The case of Ispat International
NV,” European Management Journal, August 1999, 17(4), pp. 368-78.
21 The Economist, January 10, 1998, “Making steel.”
22 Fortune, February 7, 2005, “Metal man.”
23 Fortune, 2005, ibid.
24 Businessworld,August 15, 2005, “Once an outsider, Lakshmi Mittal is now changing the face of the global
steel industry,” p. 34.
25 Steel Times International, 2002, Vol. 26(3): 4, “Controversy over Sidex bid.”
26 The Economist, 2002, February 23, 2002, “The Mittal way.”

22
Mittal Steel in 2006: Changing the Global Steel Game PG0-002

27 Robert J. Aiello & Michael D. Watkins, 2000, “The fine art of friendly acquisition,” Harvard Business Review,
November-December 2000. Emphasis added.
28 Business Week, December 20, 2004, “Raja of steel,” p. 51.
29 Aiello & Watkins, 2000, ibid, p. 107.
30 Businessworld, August 15, 2005, “Inside the empire,”p. 40.
31 Wall Street Journa,lOctober 19, 2005, “Mittal raises bar for China growth.”
32 Wall Street Journal October 19, 2005, ibid.
33 Wall Street Journal October 19, 2005, ibid.
34 Businessworld, 2005, ibid (“Inside the empire”), p. 41.
35 Business Week, 2004, ibid, p. 52.
36 Businessworld, 2005, ibid (“Inside the empire”), p. 41.
37 Businessworld, 2005, ibid (“Inside the empire”), p. 41.
38 Aiello & Watkins, 2000, ibid, p. 107.
39 Business Week 2004, ibid, p. 47/48.
40 Business Week, 2004, ibid, p. 51.
41 www.timesonline.co.uk, October 12, 2005, last accessed November 30, 2005.
42 www.timesonline.co.uk, October 12, 2005, ibid.
43 Sull, 1999, ibid, p. 9.
44 Sull, 1999, ibid, p. 9.
45 Sull, 1999, ibid, p. 9.
46 Mittal Steel May 2005 investor presentation.
47 Businessworld, 2005, ibid, p. 35.
48 Businessworld, 2005, ibid, p. 33.
49 Business Week, 2004, ibid, p. 47/48.
50 Mittal Steel company website.
51 Businessworld, 2005, ibid, p. 34.
52 Malay Mukherjee, “A view on the global steel market,” speech at Stahlmarket 2004. Available at
http://www.mittalsteel.com/mittalMain/attachments/MM%20Stahlmarkt%20speech%20v2.pdf, last accessed
November 30, 2005
53 Business Week, 2004, ibid, p.50.

54 PriceWaterhouseCoopers, 2004, ibid, p. 14.

55 PriceWaterhouseCoopers, 2004, ibid, p. 14.
56 New York Times, January 28, 2006, ibid.
57 New York Times, January 28, 2006, ibid.

23
PG0-002 Mittal Steel in 2006: Changing the Global Steel Game

58 New York Times, January 28, 2006, ibid.

59 New York Times, January 28, 2006, ibid.

24